American Healthways Reports Third-Quarter Earnings Per Diluted Share of $0.22 Versus $0.14 for the Third Quarter Last Year.NASHVILLE Nashville, city (1990 pop. 487,969), state capital, coextensive with Davidson co., central Tenn., on the Cumberland River, in a fertile farm area; inc. as a city 1806, merged with Davidson co. 1963. , Tenn. -- Earnings Excluding Incentive Bonus Revenues Increase 46% to $0.19 Per Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. Share; Raises Fiscal 2004 Earnings Guidance Ben R. Leedle, Jr., president and chief executive officer of American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Healthways Healthways can mean:
AMHC Aviation Structural Mechanic Hydraulics Chief ), today announced that the Company achieved continued substantial profitable growth for the third quarter of fiscal 2004, in line with its earnings guidance for the quarter. Revenues for the quarter, which ended May 31, 2004, increased 56% to $65,354,000 from $41,822,000 for the third quarter of fiscal 2003. Net income for the quarter was $7,484,000, up 64% from $4,550,000 in the comparable quarter last year. Earnings per diluted share for the latest quarter increased 57% to $0.22 from $0.14 for the third quarter of fiscal 2003. Results for the third quarter of fiscal 2004 and fiscal 2003 included incentive bonus revenues of $0.03 per diluted share and $0.01 per diluted share, respectively. Prior-period results have been adjusted to reflect the two-for-one stock split effected in December December: see month. 2003. Leedle commented, "American Healthways' strong third-quarter results reflect the continued momentum of the disease management industry and of American Healthways' position as the industry leader. As we discussed when communicating our third-quarter earnings guidance, our 46% growth in third quarter earnings per diluted share, excluding the impact of incentive bonuses, over the comparable quarter in fiscal 2003 was driven by contracts with new customers, expanded contracts with existing customers and increasing business with self-insured self-insured Self fund Health insurance adjective Referring to the practice of carrying an individual health insurance policy for oneself; self insurance is usually more expensive than group insurance employers on behalf of our health plan customers. Consistent with the five contracts signed in the first quarter of fiscal 2004 and the six contracts signed in the second quarter, the seven health plan contracts signed in the third quarter continued the trends toward longer contract terms and increased numbers of disease or impact conditions covered. In addition, our performance under our contracts remains strong, meeting or exceeding customer expectations, as evidenced by our incentive bonus revenues recorded for the quarter. "The highlights of American Healthways' performance for the third quarter include: --Strong Comparable and Sequential-Quarter Growth in Lives - Our actual lives under management increased 61% to 1,211,000 at the end of the third quarter of fiscal 2004 from 752,000 at the end of the third quarter of fiscal 2003. Actual lives under management increased 157,000 lives or 15% sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen from 1,054,000 at the end of the second quarter of fiscal 2004. In addition, annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. revenues in backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. at the end of the third quarter of fiscal 2004 for contracts signed but not yet implemented totaled $13,500,000. --More-Than Tripling of Self-Insured Employer Lives on Behalf of Health Plan Customers - Contributing to the strong growth in total actual lives under management, our ASO/PPO lives under management increased 284% to 315,000 at the third quarter's end from 82,000 a year earlier, while increasing 49% from 211,000 at the end of the second quarter of fiscal 2004. This growth reflected continued strong employer demand for our programs, which accounted for the 28% increase in contracts with self-insured employers to 162 at the end of the third quarter from 127 at the end of the second quarter. --Seven New, Renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. or Expanded Third-Quarter Contracts; 18 for the First Nine Months - The seven contracts signed during the third quarter are indicative indicative: see mood. of our ability to provide our health plan customers exactly the services they want from an increasingly comprehensive program suite. Four of the contracts were with new customers, including contracts to provide our diabetes diabetes or diabetes mellitus (məlī`təs), chronic disorder of glucose (sugar) metabolism caused by inadequate production or use of insulin, a hormone produced in specialized cells (beta cells in the islets of and cardiac cardiac /car·di·ac/ (-ak) 1. pertaining to the heart. 2. pertaining to the cardia. car·di·ac adj. 1. Of, near, or relating to the heart. 2. disease programs to the commercial members of Rocky Mountain Health Plans; our full suite of disease management and care enhancement programs to Private Healthcare Systems, the largest proprietary PPO PPO abbr. preferred provider organization PPO Managed care Preferred provider organization, see there Infectious disease Pleuropneumonia-like organism, see there network in the country; our StatusOne high-risk high-risk adjective Referring to an ↑ risk of suffering from a particular condition Infectious disease Referring to an ↑ risk for exposure to blood-borne pathogens, which occurs with blood bank technicians, dental professionals, dialysis unit health management program to North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. State Health Plan; and our full suite of disease management and care enhancement programs to the Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. +Choice members of Preferred Care Partners. The other three contracts signed in the third quarter are indicative of the substantial opportunity we have previously discussed to expand our business with our growing base of existing customers, as they represent the second expansion of programs for each customer. Our latest contract with Mutual of Omaha Mutual of Omaha, best known for sponsoring the popular television show Mutual of Omaha's Wild Kingdom, is a Fortune 500 insurance and financial services company headquartered in Omaha, Nebraska. adds chronic obstructive pulmonary disease chronic obstructive pulmonary disease n. Abbr. COPD A chronic lung disease, such as asthma or emphysema, in which breathing becomes slowed or forced. ("COPD COPD chronic obstructive pulmonary disease. COPD abbr. chronic obstructive pulmonary disease Chronic obstructive pulmonary disease (COPD) ") and coronary artery disease coronary artery disease, condition that results when the coronary arteries are narrowed or occluded, most commonly by atherosclerotic deposits of fibrous and fatty tissue. programs to the diabetes, heart failure and asthma asthma (ăz`mə, ăs`–), chronic inflammatory respiratory disease characterized by periodic attacks of wheezing, shortness of breath, and a tight feeling in the chest. A cough producing sticky mucus is symptomatic. programs we already provide. The expanded contract with NewQuest Health Solutions adds programs for COPD, asthma and 11 impact conditions to members of HealthSpring of Alabama Alabama, indigenous people of North America Alabama (ăləbăm`ə), indigenous people of North America whose language belongs to the Muskogean branch of the Hokan-Siouan linguistic stock (see Native American languages). and Texas, matching the full suite we currently provide to HealthSpring of Tennessee Tennessee, state, United States Tennessee (tĕn`əsē', tĕn'əsē`), state in the south-central United States. . Our latest contract with the Principal Financial Group(R), bringing our full suite of care enhancement services to its commercial health plan members, builds on the existing chronic disease management programs we provide its commercial and ASO/PPO members. --Cash Flow from Operations - Cash flow provided by operating activities was $24,960,000 for the third quarter of the current year, contributing to an increase in cash and cash equivalents to $44,450,000 at the end of the third quarter from $29,260,000 at the end of the second quarter of fiscal 2004. Raising Annual Earnings Guidance for Fiscal 2004 American Healthways today is raising its annual guidance for fiscal 2004 earnings per diluted share to $0.74 to $0.75 from the previous range of $0.71 to $0.73, reflecting the positive impact of incentive bonus revenues for the third quarter. The Company continues to expect fiscal 2004 revenues to be in a range of $245 million to $255 million. The Company also reaffirms its guidance for earnings per diluted share for the fourth quarter of fiscal 2004 in a range of $0.26 to $0.27, which includes the anticipated recording of certain performance-based revenues from the billings-in-excess-of-earnings account as contractual targets are met. The Company's earnings guidance does not include any impact of future incentive bonus revenues. The Company's earnings per diluted share of $0.15 for the fourth quarter of fiscal 2003 included $0.02 of incentive bonus revenues. Summary Mr. Leedle concluded, "Our results for the third quarter and first nine months of fiscal 2004 demonstrate our continuing growth potential as the leading provider in one of the health care industry's most rapidly expanding sectors. We remain well positioned to convert this opportunity based on our documented clinical results, the comprehensiveness of our programs and the scalability How much a system can be expanded. See scalable. scalability - How well a solution to some problem will work when the size of the problem increases. For example, a central server of some kind with ten clients may perform adequately but with a thousand clients it of our proven business model. As a result, we expect to continue to expand our total lives under management through additional contracts with new customers, expanded contracts with existing customers and increasing business with self-insured employers on behalf of our health plan customers." Amendment to Shareholder Rights Plan On June June: see month. 15, 2004, the Company's Board of Directors voted to amend its shareholder rights plan to (1) increase the purchase price for each preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. unit, (2) extend the expiration date Expiration Date The day on which an options or futures contract is no longer valid and, therefore, ceases to exist. Notes: The expiration date for all listed stock options in the U.S. of the rights to June 15, 2014, and (3) provide that the Board of Directors will review the rights plan at least once every three years to determine if continuance The adjournment or postponement of an action pending in a court to a later date of the same or another session of the court, granted by a court in response to a motion made by a party to a lawsuit. of the plan is still in the best interests of the Company and its stockholders. Conference Call American Healthways will hold a conference call to discuss this release today at 5:00 p.m. Eastern time. Investors will have the opportunity to listen to the conference call live over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the by going to www.americanhealthways.com and clicking Investor Relations Investor relations The process by which the corporation communicates with its investors. , or by going to www.streetevents.com, at least 15 minutes early to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. For those who cannot listen to the live broadcast, a telephonic replay will be available for one week at 719/457-0820, code 401259, and the replay will also be available on the Company's Web site for the next 12 months. Any material information disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). on the quarterly conference call that has not been previously disclosed publicly will be available on the Company's website at www.americanhealthways.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Provisions This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are based upon current expectations and involve a number of risks and uncertainties. In order for the Company to utilize the "safe harbor" provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, investors are hereby cautioned that these statements may be affected by the important factors, among others, set forth below, and consequently, actual operations and results may differ materially from those expressed in these forward-looking statements. The important factors include: the timing of implementation, and the effect, of regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. rules and interpretations relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Medicare Prescription Drug, Improvement, and Modernization Act The Medicare Prescription Drug, Improvement, and Modernization Act (Pub.L. 108-173, 117 Stat. 2066, also called Medicare Modernization Act or MMA) is a law of the United States which was enacted in 2003. of 2003; the Company's ability to sign and implement new contracts for disease management services and care enhancement services; the risks associated with a significant concentration of the Company's revenues with a limited number of customers; the Company's ability to effect cost savings and clinical outcomes improvements under disease management and care enhancement contracts and reach mutual agreement with customers with respect to cost savings, or to effect such savings and improvements within the time frames contemplated by the Company; the Company's ability to accurately forecast performance and the timing of revenue recognition under the terms of its contracts ahead of data collection and reconciliation; the ability of the Company to collect contractually con·trac·tu·al adj. Of, relating to, or having the nature of a contract. con·trac  tu·al·ly adv.Adv. 1. earned performance incentive bonuses; the ability of the Company's customers to provide timely and accurate data that is essential to the operation and measurement of the Company's performance under the terms of its health plan contracts; the Company's ability to resolve favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. contract billing and interpretation issues with its customers; the Company's ability to integrate the operations of StatusOne into the Company's business; the Company's ability to achieve the expected financial results for StatusOne; the Company's ability to service its debt and make principal and interest payments as those payments become due; the ability of the Company to develop new products and deliver outcomes on those products; the ability of the Company to effectively integrate new technologies and approaches, such as those encompassed in its care enhancement initiatives, into the Company's care enhancement platform; the Company's ability to renew and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. maintain contracts with its customers under existing terms or restructure these contracts on terms that would not have a material negative impact on the Company's results of operations; the ability of the Company to implement its care enhancement strategy within expected cost estimates; the ability of the Company to obtain adequate financing to provide the capital that may be needed to support the growth of the Company's operations and to support or guarantee the Company's performance under new contracts; unusual and unforeseen patterns of health care utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be by individuals with diabetes, cardiac, respiratory respiratory /res·pi·ra·to·ry/ (res´pi-rah-tor?e) pertaining to respiration. res·pi·ra·to·ry adj. Of, relating to, used in, or affecting respiration. and/or other diseases or conditions for which the Company provides services, in the health plans with which the Company has executed executed 1) adj. to have been completed. (Example: "it is an executed contract") 2) v. to have completed or fully performed. (Example: "he executed all the promises made in the contract") 3) v. a disease management contract; the ability of the health plans to maintain the number of covered lives enrolled in the plans during the terms of the agreements between the health plans and the Company; the Company's ability to attract and/or retain and effectively manage the employees required to implement its agreements; the impact of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. involving the Company; the impact of future state and federal health care legislation and regulations on the ability of the Company to deliver its services and on the financial health of the Company's customers and their willingness to purchase the Company's services; and general economic conditions. The Company undertakes no obligation to update or revise any such forward-looking statements. American Healthways, Inc. is the nation's leading and largest provider of specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. , comprehensive disease management, care enhancement and high-risk health management services proven to improve the quality of health care and lower costs. As of May 31, 2004, the Company had 1,211,000 actual lives under management nationwide. For more information visit www.americanhealthways.com.
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
May 31, May 31,
------------------ ------------------
2004 2003 2004 2003
-------- -------- -------- --------
Revenues $ 65,354 $ 41,822 $173,555 $119,461
Cost of services 41,413 26,738 112,577 76,170
-------- -------- -------- --------
Gross margin 23,941 15,084 60,978 43,291
Selling, general &
administrative expenses 5,842 4,519 17,006 12,230
Depreciation and
amortization 4,784 2,722 13,354 7,923
Interest 841 132 2,676 438
-------- -------- -------- --------
Income before income taxes 12,474 7,711 27,942 22,700
Income tax expense 4,990 3,161 11,177 9,307
-------- -------- -------- --------
Net income $ 7,484 $ 4,550 $ 16,765 $ 13,393
======== ======== ======== ========
Basic income per share: $ 0.23 $ 0.15 $ 0.52 $ 0.43
======== ======== ======== ========
Diluted income per share: $ 0.22 $ 0.14 $ 0.48 $ 0.41
======== ======== ======== ========
Weighted average common
shares and equivalents:
Basic 32,442 31,083 32,094 30,920
Diluted 34,803 32,974 34,607 32,810
American Healthways, Inc.
Statistical Information
(Dollars in thousands)
(Unaudited)
May 31, May 31,
2004 2003
-------------------------------------
Operating Statistics
Actual lives under
management at end of period 1,210,549 751,714
Annualized revenue in backlog $13,507 $21,600 (1)
(1) Includes contracts signed in June 2003.
Reconciliation of Diluted Earnings Per Share Excluding Incentive Bonus
Revenues to Diluted Earnings Per Share (EPS), GAAP Basis
Three Months Ended Three Months Ended
May 31, May 31,
2004 2003
------------------ ------------------
EPS excluding incentive bonus
revenues(2) $ 0.19 $ 0.13
EPS attributable to incentive
bonus revenues 0.03 0.01
------------------ ------------------
EPS, GAAP basis $ 0.22 $ 0.14
================== ==================
(2) EPS excluding incentive bonus revenues is a non-GAAP financial
measure. The Company excludes incentive bonuses from this measure
primarily because of their unpredictability and relies on EPS
excluding incentive bonus revenues as a primary measure to review
and assess the ongoing operating performance of contracts. The
Company believes it is useful to investors to provide disclosures
of its operating results on the same basis as that used by
management. You should not consider EPS excluding incentive bonus
revenues in isolation or as a substitute for EPS determined in
accordance with accounting principles generally accepted in the
United States.
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
May 31, August 31,
2004 2003(1)
----------- ----------
Assets
Current assets:
Cash and cash equivalents $ 44,450 $ 35,956
Restricted cash 585 -
Accounts receivable, net
Billed 24,969 18,526
Unbilled 4,552 7,971
Other current assets 6,062 4,267
Income taxes receivable 1,125 -
Deferred tax asset 923 758
-------- --------
Total current assets 82,666 67,478
Property and equipment
Leasehold improvements 7,771 5,045
Computer equipment and related software 48,626 38,214
Furniture and office equipment 13,792 9,558
--------- --------
70,189 52,817
Less accumulated depreciation (35,525) (25,166)
-------- --------
Net property and equipment 34,664 27,651
Long-term deferred tax asset 67 -
Other assets 2,800 182
Intangible assets, net 20,834 264
Goodwill, net 93,520 44,438
-------- --------
Total assets $234,551 $140,013
-------- --------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 5,003 $ 4,067
Accrued salaries and benefits 4,285 9,162
Accrued liabilities 3,496 2,790
Contract billings in excess of earned revenue 8,392 3,272
Income taxes payable - 391
Current portion of long-term debt 12,324 389
Current portion of long-term liabilities 995 360
-------- --------
Total current liabilities 34,495 20,431
Long-term debt 39,599 109
Long-term deferred tax liability 11,838 2,380
Other long-term liabilities 5,558 4,662
Commitments and contingencies
Stockholders' equity
Preferred stock
$.001 par value, 5,000,000 shares
authorized, none outstanding - -
Common stock
$.001 par value, 75,000,000 and 40,000,000
shares authorized, 32,664,545 and
31,593,464 shares outstanding 33 32
Additional paid-in capital 87,814 74,070
Retained earnings 55,094 38,329
Accumulated other comprehensive income 120 -
-------- --------
Total stockholders' equity 143,061 112,431
-------- --------
Total liabilities and stockholders' equity $234,551 $140,013
-------- --------
(1) Certain items have been reclassified to conform to current
classifications.
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
May 31,
-------------------
2004 2003(1)
Cash flows from operating activities:
Net income $ 16,765 $ 13,393
Adjustments to reconcile net income to net cash
provided by operating activities, net of
business acquisitions:
Depreciation and amortization 13,354 7,923
Amortization of deferred loan costs 576 207
Tax benefit of stock option exercises 8,159 1,527
Increase in accounts receivable, net (2,595) (3,609)
Increase in other current assets (1,696) (476)
Increase (decrease) in accounts payable 394 (2,194)
Decrease in accrued salaries and benefits (5,261) (4,684)
Increase in other current liabilities 1,987 15,125
Other 2,003 851
Decrease in other assets 204 169
Payments on other long-term liabilities (300) (332)
-------- --------
Net cash flows provided by operating activities 33,590 27,900
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment (15,734) (11,760)
Business acquisitions, net of cash acquired (60,223) -
-------- --------
Net cash flows used in investing activities (75,957) (11,760)
-------- --------
Cash flows from financing activities:
Increase in restricted cash (585) (6,000)
Proceeds from issuance of long-term debt,
net of deferred loan costs 57,685 -
Payments of long-term debt (9,329) (285)
Exercise of stock options 3,090 823
-------- --------
Net cash flows provided by (used in) financing
activities 50,861 (5,462)
-------- --------
Net increase in cash and cash equivalents 8,494 10,678
Cash and cash equivalents, beginning of period 35,956 23,924
-------- --------
Cash and cash equivalents, end of period $ 44,450 $ 34,602
======== ========
(1) Certain items have been reclassified to conform to current
classifications.
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